Ministers should offer foreign firms tax breaks to pump cash into Red Wall areas, a Tory think-tank urges today.
A report by Onward calls on the Government to make it more attractive to invest in regions struggling to compete with the cash-soaked South East and London.
A study says that while foreign investments in London tripled between 1997 and 2016, they dropped 15% in the rest of the UK over the same period.
Boosting the amount of money overseas companies plough into parts of the North and Midlands would help repay voters who backed the Conservatives at the 2019 election – and meet Boris Johnson's “levelling-up” pledges, the think-tank argues.
Its 69-page report, 'Firm Foundations: Levelling-up inward investment', says: “Foreign direct investment (FDI) can have a transformative role on a country’s long-term growth.
“Through a ruthless focus on attracting certain types of FDI in some sectors, together with trade liberalisation and modernisation, economies like Ireland, Singapore, and the former East Germany have transformed some of their least productive places and industries over the last half century.”
More controversially, the report calls for bosses of foreign firms to be given personal tax breaks.
“The UK should introduce a combined tax relief and immigration route to encourage senior executives to choose Britain as a destination for their investment,” it says.
“This would replace the existing Tier 1 Investor Visa, which requires investors to invest in UK gilts – doing little to create jobs or growth – and would grant the executives both a temporary visa to work and a reduced personal income tax rate for the first two or three years of their stay in Britain, assuming their FDI project was over a certain size.”
Onward's deputy director Will Holloway said: “Getting good employers into lagging places is the absolute key to levelling up.
“No amount of Government schemes will work if we don't get private businesses investing in them.
“But the trend has been for more and more investment to be sucked into the capital, while other countries are tooling up with more and more aggressive policies to grab these mobile investments.
“We need a business-led approach to levelling up.”
A Treasury spokeswoman said: “We are committed to levelling up opportunities and driving investment across the whole of the UK, as we build back better from the pandemic.
“As well as introducing the super- deduction, the biggest two-year business tax cut in modern British history, we have set out plans to establish Freeports in regions across the UK which will allow businesses to claim a range of tax reliefs that will help attract new investment, jobs and opportunities.
“This is on top of a £100billion investment in infrastructure and a new £4.8billion Levelling up Fund to invest in local priorities, help spread opportunity and create high quality jobs across all UK regions.”